BUDGET

Fiscal Commission Unveils Preliminary Plan

By Humberto Sanchez

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President Obama walks down the West Wing Colonnade with Erskine Bowles and former Sen. Alan Simpson, the co-chairs of the National Commission on Fiscal Responsibility and Reform.(SAUL LOEB/AFP/Getty Images)

The chairmen of President Obama’s fiscal commission proposed a sweeping collection of spending cuts and tax increases today in a bid to jolt the panel's 16 other members away from their Republican and Democratic orthodoxies.

The proposals call for significant reductions in future Social Security benefits -- an untouchable issue for many Democrats -- and a top-to-bottom tax overhaul that would raise tax burdens by $80 billion a year in 2015 and $160 billion a year by 2020.

Their plan calls for slashing annual discretionary spending, including defense, by $184 billion by 2015. "Mandatory" spending, from Social Security and Medicare to certain farm subsidy programs, would be cut by $78 billion a year in 2015 and more after that.

But while the proposals represent an agreement between the panel's two co-chairs -- Erskine Bowles, a Democrat and a former White House chief of staff under President Clinton; and former Sen. Alan Simpson, R-Wyo. -- they hardly signal a consensus among the panel's 18 members.

Indeed, several lawmakers on the panel immediately said they disagreed with many of the ideas.

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The White House said it would wait and see.

“The president will wait until the bipartisan fiscal commission finishes its work before commenting," said White House spokesman Bill Burton. "These ideas, however, are only a step in the process toward coming up with a set of recommendations, and the president looks forward to reviewing their final product early next month.”

The deficit commission is supposed to present recommendations to Congress by December 1, less than three weeks from now. Experts are skeptical it will be able to reach a consensus, because 14 of the 18 members need to support any recommendations. With 12 of those members being current lawmakers in Congress -- six Democrats and six Republicans -- lawmakers from either party can veto any proposal they don't like.

Nevertheless, Bowles and Simpson outlined the stark measures that are likely to be necessary to stabilize the federal debt, even at relatively high levels, by 2015. It outlines $100 billion in “illustrative’’ cuts in defense spending and comparable cuts in domestic programs. It proposes an increase in the retirement age for collecting Social Security benefits, cuts in the future growth of payments and more cuts yet to higher-income retirees.

Last but not least, the co-chairs outlined several proposals for a sweeping tax reform that would wipe out most or all of the $1.1 trillion a year in "tax expenditures" -- budget jargon for tax breaks that range from the mortgage-interest deduction to countless corporate breaks. In exchange, the plan calls for reducing individual tax rates across the board. The top marginal tax rate for individuals would drop to as little as 24 percent, down from 35 percent today and 39.6 percent if the Bush tax cuts are allowed to expire.

Republicans and Democrats alike have preached about tax reform for years, but Republicans have almost uniformly vowed to fight any net increase in taxes. Democrats, meanwhile, have increasingly used tax credits as an alternate method of distributing benefits to lower-income people. The Earned Income Tax for low-income working parents is one of the government's biggest anti-poverty programs.

Bowles and Simpson presented their package to the panel's other members at a closed-door meeting Wednesday morning. But many said they could not support it in its current form.

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“The chairmen have made their proposal, it’s a serious proposal,” said Senate Majority Whip Dick Durbin, D-Ill., who stressed that the package “is the starting point of our conversation.”

While commission members were reticent on offering details of the plan, Durbin said that the proposal exceeds the president’s goal of bringing down the deficit to about 3 percent of gross domestic product by 2015.

Rep. Jan Schakowsky, D-Ill., said that the chairmen have proposed to make Social Security solvent and make adjustments to Medicare, both of which she characterized as cuts.

"It's not a proposal I can support right now," she said.

"I think if there were to be a vote of 14, it would look very different from the proposal that was made by the chairmen and I can't imagine that they didn't understand that," Schakowsky said.

Republican commission members, Reps. Jeb Hensarling of Texas, House Ways and Means Committee ranking member Dave Camp of Michigan, and House Budget Committee ranking member Paul Ryan of Wisconsin, called the plan "provocative" and pledged to keep working.

"While we have concerns with some of their specifics, we commend the co-chairs for advancing the debate," the Republican lawmakers said in a statement.